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American Morning

Former Enron Chairman Ken Lay Will Appear Before Congressional Committee

Aired February 11, 2002 - 07:08   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN CORRESPONDENT: Well, the Enron story will continue big time this week. The former chairman, Ken Lay, says he will appear before a congressional committee. However, he now says he's not going to say anything except that he plans to take the Fifth Amendment. And the "Washington Post" is reporting this morning the government is going to take over Enron's pension plans. The Labor Department says they're ready to go to court to get it if the company, Enron, doesn't agree to hand it over.

It's all a giant blame game and it's a long way from being over. Enron's board members are among those accused of aiding in the company's collapse. And now the AFL-CIO has launched a campaign to persuade other public companies to remove Enron directors from their boards. And apparently it's working.

Just last week, Wendy Gramm, the wife of Texas Senator Phil Gramm, resigned her post as a board member at Invesco Funds. That followed Robert Jaedicke's resignation from the California Water Service Board. Jaedicke last week also testified before Congress. And yet another Enron director, Frank Savage, could get the boot from Qualcomm's shareholders tomorrow. He's on that board, as well, and there'll be a vote as to whether or not to remove him.

Joining us now to talk about this from Washington is William Patterson, who's the director of the AFL-CIO's office of investment. Mr. Patterson, welcome. Nice to have you with us.

WILLIAM PATTERSON, AFL-CIO: Good morning.

CAFFERTY: How much of the buck stops at the board's door in the Enron situation?

PATTERSON: All of it. These are shareholder representatives. In our case, these are representatives of worker pension fund investors and their sole responsibility is protecting shareholders. They, they're there to serve investors, not executives. And the Enron board allowed executives to loot the company and therefore we believe they should step down from other boards.

CAFFERTY: All right, I mentioned Robert Jaedicke in the lead-in. He resigned last week from the board of California Water Service Group. He had something to say about the board's role in the collapse of Enron. I'd like to listen to a little piece of tape from him and then we'll talk about what he had to say.

(BEGIN VIDEO CLIP)

ROBERT JAEDICKE: Enron management, Arthur Andersen, the internal legal department each had a role in our systems and controls. And the board reasonably believed that these controls were adequate and would work.

(END VIDEO CLIP)

CAFFERTY: If I'm a ember of the board of directors and I talk to the executives and the executives say well, Arthur Andersen did an audit and they're OK on the thing and our legal department looked at it and they've signed off on it and the outside law firm that looked at some of Andersen's work signed off on it, what am I think to think or, you know, how am I supposed to figure out that maybe I'm being misled or lied to in a situation like that?

PATTERSON: But that's your job as a director. You're there to question. You're there to review and not rubber stamp these decisions. The Enron board suspended their code of ethics to allow these off the book partnerships to be set up and that led to the collapse of Enron. The sole responsibility for what happened there is really, really lays at the doorstep of the directors and we intend to make sure other companies that have Enron directors are going to hear the full story of what happened at Enron and to make sure that these directors are not performing on their boards the same way they performed at Enron.

CAFFERTY: What is it specifically that the AFL-CIO is doing in this regard?

PATTERSON: We're working with other shareholders to make sure that these board members are not renominated. We have made an appeal to the boards of some 20 companies that have Enron directors to not renominate them if they can't step forward with the story of how they defended shareholders at Enron. We haven't heard that story yet. So we intend to be organizing shareholders, working with shareholders to demand that they step down from companies like Qualcomm, Motorola, Lockheed Martin. These are all going to be litmus tests of the integrity of corporate governance.

CAFFERTY: To what degree do you think we may look back two, three, four, five years down the road at Enron as a watershed event, if you will, in terms of shareholder rights, pension regulations? Is this going to be a monumental event in changing some of the ways that corporations do business, publicly traded corporations?

PATTERSON: This is a profoundly important moment in terms of corporate governance because we have the nation, the capital markets focused on the role of individual directors and who they serve. In many corporations we see Enron style practices are commonplace. We see board of directors rubber stamping pay packages, exorbitant pay packages for executives and these are all symptoms of conflicts of interest, which permeate many board rooms. And this could change if shareholders are focused and diligent. And we intend to be. CAFFERTY: All right, sir, I appreciate you being with us on AMERICAN MORNING. Thank you very much.

PATTERSON: Thank you.

CAFFERTY: All right, William Patterson of the AFL-CIO.

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